tv Nightly Business Report PBS November 30, 2012 4:30pm-5:00pm PST
>> tom: i'm tom hudson. businesses aren't waiting for a deal, they're rewarding shareholds with special dividends ahead of higher taxes in 2013. >> susie: investors sour on yum brands, after the parent of k.f.c. and pizza hut says sales are slowing in china. >> tom: that and more tonight on "n.b.r." >> susie: the fiscal cliff talks are going nowhere. that's the word from john boehner today. the house speaker characterized the negotiations to avoid huge tax increases and spending cuts at a stalemate. the race to solve the fiscal cliff triggered another round of dramatic sound bites from republicans and president obama. darren gersh has the latest. >> reporter: the president is still pushing to wrap up a deal on the fiscal cliff before christmas and just in case anyone missed that point, he visited a toy factory to urge congress to avoid raising taxes on the middle class. >> that's sort of like the lump of coal you get for christmas.
that's a scrooge christmas. a typical middle-class family of four would see their income taxes go up by about $2,200. >> reporter: t psidents oposg to raise taxesy $1.6 trillion, while cutting spending by $400 billion. on top of that, mr. obama asked for $50 billion more for infrastructure spending and $140 billion to extend unemployment insurance benefits and the payroll tax cut. republicans literally laughed it off. >> they want... they want to have this extra spending that's actually greater than the amount they're willing to cut. i mean, it's... it's... was not a serious proposal. and so, right now, we're almost nowhere. >> reporter: across the capito republican senate leader mitch mcconnell told the "wall street journal" his party would be willing to bring in more tax revenues if the president agreed to tighten up the eligibility requirements for entitlements. mcconnell said that could mean higher medicare premiums for the
wealthy, an increase in the medicare eligibility age and slower cost-of-living increases for social security. but he ruled out higher tax rates. most democrats have ruled out all of those cuts, arguing they would undermine the nation's most successful programs. the president asked for, but it appears republicans would be unlikely to agree to give the president the ability to raise the debt limit unless a super- majority in congress disapproves after the fact. that option was developed by senator mcconnell himself. >> members hate that vote, as you know, because they are voting to increase the debt, but that's why they should have it, because it's a reminder of what this fiscal policy is doing and it holds congress accountable for doing it. >> reporter: so the first week or real bargaining on the fiscal cliff ended with a loud chorus of "no's." and there are only a few more weeks left to get to yes on some of the toughest policy issues dividing democrats and republicans. darren gersh, "n.b.r.," washington.
>> tom: many companies aren't waiting on washington to reach an agreement on taxes and spending. they're taking action now to pay shareholders, by declaring special dividends. today, whole foods became the latest in a slew of firms opting for one-time payouts. suzanne pratt reports on what's behind these investor pay-days. >> reporter: costco is doing it. brown forman-- the maker of jack daniels and finlandia is also doing it. today, even whole foods is finding it appetizing. they've all announced special dividends, eager to reward their shareholders with a nice check before expected tax increases happen next year. >> current law says that qualified dividend income tax rates are at 15%. and, if no legislation is passed between now and then end of the year, those rates would go up to as high as 43.4%. >> companies just want to pass along these dividends. it's a thank you to shareholders. it sparks interest in their stock.
>> reporter: according to s&p, this month alone 216 companies have declared special dividends. last november only 72 firms decided to make similar payouts. this is not the first time u.s. companies have been so generous. exactly two year ago, there was a significant pickup in the number of u.s. companies declaring special dividends. the threat of higher tax rates for dividends was behind that spike, too. ample cash on a firm's balance sheet is also a common catalyst for special dividends. >> basically, companies don't want to have too much cash. and, if you don't have places to invest, if you don't have good takeover opportunities then they want to shrink the cash. >> reporter: it turns out, companies with insiders who own big chunks of stock such as brown forman are also more inclined towards special dividends. don't forget, they get rewarded, just like regular shareholders. a recent study by markit research shows more than half of
the companies declaring special dividends in late 2010 had executives who owned at least 25 percent of the shares. that might give investors the idea of chasing companies likely to declare special dividends. after all there is some evidence that firms get a small bump in their stock price after they make the announcement. but, market pros say don't do it. >> the special dividend situation i think is only a short-term effect on the market. i want our clients investing for the rest of the cycle, for the next 12 to 24 months. i don't want them doing things that they think might happen in the month of december. >> reporter: speaking of december, hundreds more companies are expected to say thank you to shareholders with special dividends in the coming weeks. suzanne pratt, "n.b.r.," new york. >> tom: cliff or no cliff. still ahead, tonight's market monitor guest says stock prices
and the economy will grow in 2013. hank smith of haverford trust joins us. >> tom: super storm sandy keeps showing up in some economic data. this time: consumer spending. spending fell 0.2% in october. it was expected to be up that much. stocks were mixed with continued nervousness about the fiscal cliff. the dow gained just three points, the nasdaq lost nearly two. the s&p 500 was virtually unchanged. on the week, the dow up just barely. the nasdaq the biggest gainer: up almost 1.5%, the s&p up half a percentage point.
>> susie: investors took a bite out of yum brands today. the stock tumbled 10% after the parent of k.f.c. and pizza hut said its business in china is slowing. yum's c.e.o. warned that china sales will fall by 4% in the fourth quarter, that's a big drop from the same period a year ago when sales surged 21%. blaming the weak chinese economy, yum also said it plans to reduce the number of restaurant openings in the asian nation. yum operates roughly 5,000 restaurants in china, accounting for half of its total sales. >> susie: joining us now with more on the chinese consumer and the economy, nicholas consonery, asia analyst at the eurasia group. nick we've heard this story before from nike, mcdonald's, tiffany's recently. how serious is this consumer slow-down in china?
>> well, susie, it hasn't been too bad quite yet. it's very clear for the past year and a half, really, the chinese economy has been slowing pretty drastically when you consider that we're talking about an economy growing at 10% a year just four years ago. the financial crisis has had a really-- a very noteworthy impact on the economy. growth there is clearly slowing, but that hasn't really bled into he consumer demand picture qui as much yet. so far, where we've seen the slow-down is on the investment side and export side, less than on the consumer demand story. we're starting to see that happen just now. >> susie: let's talk a little bit on the consumer side. we know that american brands, popular brands, are popular with the up-and-coming chinese consumer. is this do you think a short-term phenomenon, or do you think that chinese consumers are now turning more to chinese-made goods? you go to china a lot. what's your sense on this? >> it possible, but i don't think it's going to happen very
sharply quite yet. there's actually a good story here, and the story is we're starting to see over the past two months a bit of an uptick in economic growth activity in china. there's been manufacturing activity that's been very good. there's been demand storiologist the export side from countries around china that sell into china that have been recently good. so i think there's a reason to be hopeful that we're going to see an uptick here. longer term, no question, chinese consumers are going to be more favorably inclined to buy goods that are made in china. but i don't think we expect to see a very sharp shift on that right now in the next couple of months. >> susie: you don't think this is going to impact the companies that have a china strategy? we hear from so many companies like starbucks or marriott hotels who say china is going to be their biggest market long-term outside of the united states. do you think that they're on track to continue with that policy, despite the bumps along the way? >> yeah, i think the big story here is really going to be the urbanization story.
i mean the expectation that the chinese government has is really azing. they expect $300 million people are going to move from rural areas to urban areas within china over the next 20 years. if that happens the way the government expects it's going tow happen, that's going to be a huge demand story for consumption in china and it doesn't matter if you're an american company or chinese company or japanese company or anyone else, that demand story is going to be huge. >> susie: so there's new leadership in china. you think that, that's going to be the continuing theme? what response to you expect from the new leader? >> well, there's a big question, and the question is how seriously andow successful this leadership can be in tackling this issue of economic reform. i mean the financial crisis made it clear. the chinese economy is unsustainable. it's too dependent on global growth and not dependent enough on the consummittion story we're talking about. if they can shift the focus in
china, that will be a great long-term story. >> susie: nicholas consonery asia analyst at the eurasia grp. >> tom: apple's iphone 5 got the okay from chinese regulators. the smartphone will go on sale there in about two weeks. it's an important market for apple. in recent months, apple's market share in china has been cut in half to just 10%, something blamed on the lack of the model there. the iphone 5 is expected to be a big hit in china. next friday its newest ipad and ipad mini will hit stores there too.
>> susie: greece is one step closer to getting $57 billion in bailout loans. german lawmakers approved the deal reached earlier this week. greece agreed to measures that will drastically reduce its debt over the next seven years. european stock markets and the euro rose on the news. here on wall street, tom, a neutral day on most people here, investors here feeling anxious over the gridlock on the fiscal cliff. the last day of trading for november kind of wimped out. >> tom: yeah, not a lot of price action. lots of volume, though, to end the month, lots of trading volume, but not a lot of price movement here. let's go ahead and take a look at the market focus with the major indices this friday. the major stock indices ended essentlly changed today even with the rhetoric out of washington. the s&p 500 spent most of the session in the red after the disappointing drop in consumer spending. the index finished with a fractional gain. trading volume spiked at the end of the month.
1.2 billion shares on the big board. just under 2.2 billion on the nasdaq. two traditional dividend-paying sectors saw the biggest rallies. the utilities sector was up 1%. telecommunications rose a half percent. despite today's rally, the utility sector has been the worst place to be this month. they have been hit by worries about the lack of power demand growth and also the threat of higher taxes on dividends. ths month,he ilities sector lost 5%. but consumer stocks performed the best. the consumer discretionary sector gained 3% in november. among utility stocks today, duke energy jumped 2.3%. the firm has been subject to a board room drama since july. c.e.o. jim rogers has agreed to retire at the end of next year. on the consumer side, wal-mart added 1.7%, ending at a three week high. this was the biggest gain of any dow jones stock today. if you use fed-ex you may be paying more next year. the delivery company will raise its grnd and home delivery
shipping fees at average of 4.9% next year. the higher prices didn't lead to a higher share price today. the stock fell 1.4%. fed-ex has warned of customers seeking out cheaper shipping options. meantime, the inability to raise prices hit versign. you may recognize the company logo from the internet. verisign manages internet addresses, translating the web addresses into digits that computers use to communicate. the company won a new contract from the government oversee web addresses, but it can't raise prices. and that sent shares plunging, falling 13.2%. volume jumped tenfold. this is its lowest price since december. its previous contract allowed for price hikes of as much as 7%. but the new deal doesn't include that, raising concerns about the company's ability to grow. while we're talking about the internet, online game company zynga continues coming under pressure thanks to how much it relies on facebook for its business.
late yesterday, zynga said it has a new deal allowing zynga to hot games outside of facook. that news sent shares down 6.1% today because the deal also allows facebook to develop its own online social video games. that would make zynga's biggest source of business also a new competitor. facebook was up, closing at its highest price since july. the stock added 2.5% today. it remains $10 per share below its initial offering price when it went public in may. another one-time online darling, group-on saw heavy selling pressure, falling 8.7%. volume more than doubled. co-founder andrew mason will remain c.e.o. as the board of directors decided to keep h. the company has struggl with more competition in the daily deals business and weakness in its international operations. four of the five most actively traded exchange traded products were lower. the lone gainer was the s&p 500 tracking e.t.f. up a fraction. and that's tonight's market focus.
>> tom: regardless if there's an agreement to avoid the fiscal cliff before the end of the year or not, our friday market monitor thinks the economy and the stock market will climb higher next year. hank smith is the chief investment officer of haverford trust, managing $6.5 billion. so, hank, for investors now, will it pay to wait and see? in other words, should they not buy anything now hoping that there's some kind of conclusion before the end of the year? >> well, tom, if they're already invested, stay invested. this is too trick tow try to
trade around. but if you do have cash and we have a sell-off because congress fails to bridge this fiscal cliff, we think it will be an extraordinarily good buying opportunity and you should be able to take advantage of that. >> tom: when we saw the first tarp legislation fail in the house, the s & p 500 lost more than 8% in a single day. could we see tha kind violent reaction? >> oh, absolutely. and, you know, it will be the market's way of saying to congress, "ladies and gentlemen, you made a mistake. let's get back into session and have another vote on this." because the full effects of the fiscal cliff does spell a recession at some point in 2013. and no politician-- democrat or republican-- wants to see that. >> tom: with that in mind, last time we spoke with you it was june and the european debt crisis was in the headlines. now it's the fiscal crise here in the united states. yet, the rket has continued to climb. so what does that tell you about the underlying shape of the stock market? >> well, i think it says there
is momentum in this market. the market believes that there will be a solution to the fiscal cliff. and that there will be solutions, and europe is getting better. so slowly but it is getting better. so this-- 2013 is really going to be the year that certainty replaces uncertainty, and that should unleash a lot of pent-up demand and tailwinds. >> tom: a lot of investors can only hope so. tiffany, just yesterday, released some disappoint. the stock price got hit. t.i.f. is the ticker symbol on tiffany. tell us what you anticipate here. you're not scared of some of the slow-down we're seeing with consumer demand on jewelry? >> no, we think some of the issues that have impacted tiffany this quarter and even the previous quarter, such as higher input costes, softness in asia, are temporary,ot secular longerm trends.
the intermediator to long-term thesis with tiffany is very solid. it's about emerging markets and taking advantage of an iconic brand in the creation of wealth around the world. >> tom: emerging markets tend to be somewhat more risky. but you're also looking for health care, which tend to be more defensive. quest diagnostics her play here. the stock has been under some pressure as the company is trying to restructure itself. >> yes. but their quest is going to take advantage of two major trends. one is the affordable health care act which in 2014 will bring some 30 million additional people into the insured category. and that should mean more testing. plus want aging of the baby boom generation is a huge factor, positive factor for quest, because we know elderly people go for testing five times more than younger people. >> tom: yeah, and quest
diagnostics provides those outsource services for all tse doctor visits. let's see how you did since june 8. you liked mcdonald's and eaton. mcdonald's, essentially, has been dwind length a little bit, moving lower. but eaton has been a nice move with double-digit increase. do you still like them? >> we still do. the fundamentals are very strong there. the valuations are attractive. they both have dividend yields that are greater than yields on their own 10-year debt. so we would much rather be owners of the stocks than owners of the bonds in those cases. >> tom: you would rather be stock owners than company lenders. how about the four stocks we mentioned tonight? do you own them all? >> we do, and i own them personally. >> tom: our friday market none torfrom nasdaq, hank smith with haverford trust. >> susie: monday on "n.b.r.": ford motor is shifting gears, focusing new attention on one of its iconic brands. we talk with ford c.e.o. alan mulally. and later next week, ever wonder
what goes into making those cardboard store displays. a look at how one box company is reinventing itself. >> susie: with all the slings and arrows on capitol hill this week abt the fiscal cliff, americans are finding little to laugh at. and tonight that's got lou thinking about having a sense of humor. here's author and educator lou heckler. >> because i use a lot of humorous stories in the speeches i give, i am often asked: what if you don't have much of a sense of humor? i think we all have the capability to enjoy humor. i also know lots of things get in the way: stressful and exacting jobs, maybe health problems you have or someone close to you has. those are real and they can be barriers. that said, i can't think of anything that keeps life in perspective more than cultivating and usina sense of humor. i remember my mother and dad saying this about someone they admired: he's cool, calm, and collected. i think those three apply to well-placed humor, too. cool brings a burst of fresh air into situations that can get
overheated. calm: it's hard to be funny and angry at the same time. if you are both, that's sarcasm. collected: the shortest distance between two people is a smile. we collect more allies with smiles than with frowns. longtime newsman david brinkley once said, a successful man is one who can lay a firm foundation with bricks others have thrown at him. maybe having a sense of humor works as a good brick deflector, too. i don't think a sense of humor can be taught in a traditional class. but i do believe we can model the way. i know i'm committed to staying the course. i've always wanted to be described as cool, calm and collected! i'm lou heckler. >> tom: finally tonight, we want to let you know about a special guest scheduled for next week on "n.b.r." >> i'm paul kangas, wishing you the best of goodbyes. >> tom: paul will join us on the broadcast ursd nigh cember 6. we'll talk about changes in the market and he'll answer some of your questions. that's thursday, december 6. you can submit your questions on
facebook or twitter @bizrpt. >> susie: i was talking to paul today. he's very excited about come back and also answering those questions. i'm excited, too, because i'll be in mime weyou and paul, you know, on the set answering those questions. so really looking forward to it. >> tom: it will be a lot of fun thursday night on the set. looking forward to seeing those questions at facebook and twitter. get those questions into us. >> susie: absolutely. >> susie: that's "nightly business report" for friday, november 30. we want to remind you this is the time of year your public television station seeks your support. >> tom: on behalf of your public television station, thank you for your support. good night, everyone. we'll see you online at nbr.com and back here monday night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org